BANGALORE, Hyderabad and Chennai may have stolen some of the limelight from the commercial capital of the country. While techies love the cooler climate of Bangalore, some manufacturers have opted for the lower real estate prices and better logistics of the South. But can Mumbai regain some of its lost charm?

Mumbai has been drudging along at a GDP rate of 2.4 per cent in recent years; the choc-a-bloc traffic and the particulate matter in the air are not helping. Mumbai's GDP growth fell from 7 per cent to a surprisingly low 2.4 per cent per annum between 1998 and 2002 while India's growth rate was higher at 5.6 per cent. But enthusiasts do believe that the city is nowhere near saturation levels and growth rates can scale up.

"There is considerable opportunity available for Mumbai if one were to look at the huge gap in financial trading time zones between Zurich and Singapore on the ring of global trade, which can be best filled by Mumbai considering its geographical location, time zone and the economic growth achieved so far," says Dr Subir Gokarn, Chief Economist, Crisil.

This ring now consists of Singapore, Hong Kong, Tokyo, Los Angeles, New York, London and Zurich, after which there is a huge gap in time till the markets open in Singapore. "But the city needs to offer some bait for trading to shift here. Pretty much like the way the NSE offered incentives to attract trade from the BSE when the former was launched," says Dr Gokarn.

The Indian bourses have certainly caught the flavour of prominent foreign institutional investors and the NSE registers the third largest number of transactions in the world after the NYSE and the Nasdaq.

The full convertibility of the Indian rupee and the removal of curbs on FII investment limit in the domestic debt market are the hurdles to be cleared to make Mumbai more prominent from a global standpoint. But the Reserve Bank of India has made it amply clear that it is in no hurry to set the rupee on a free float. The depth and volumes in the debt, currency and derivative markets also do not match global standards.

Said the treasury head of a leading foreign bank in the country: "Mumbai is far from getting on the global map, although we do have plenty of talent and, of late, good communication systems. The foreign exchange and debt markets are lacking in terms of depth, liquidity, and volumes. Dubai is fast taking the slot between Zurich and Singapore on the global map."

The Indian debt market is the largest after Japan and South Korea, says Mr Jayesh Mehta, Head, Debt Research, DSP Merrill Lynch. However, it lacks the variety of investor profiles and the number of investors that Singapore enjoys because of the regulatory constraints and the nascent state of several financial intermediaries.

The foreign exchange market, though set in the right direction today, grosses well below a billion dollars daily while active global markets run into several billions of dollars.

Commercial activity is certainly on a roll in the city  which has a per capita income three times that of India's  with many companies, retail stores and residential complexes coming up. The maximum demand for property now is from IT and IT-enabled service companies.

The demand will only go up provided there is increased land availability at affordable prices and a host of infrastructure projects to fix bottlenecks in the city with a population of 11.9 million as per the 2001 Census. Real estate prices in the city have fallen to half in the posh South Mumbai addresses from the boom times of 1994-95 but some more reduction in valuations are expected as the textile mill land of Central Mumbai get released.

Several retail chains and malls have sprung up in the suburbs of the city. RPG Enterprises entered the city only recently. "We have entered Mumbai now since real estate prices have stabilised and there is plenty of land available with mill areas being released.

The rising mall culture will also create more opportunities," said the spokesperson of RPG Enterprises. RPG recently set up the Giant Hypermarket, Music World and Health & Glow stores in Malad, a northern suburb. For retail chains, Mumbai is a formidable market with a longer break-even period than in Chennai or Bangalore as not only are real estate prices higher but logistics is always a problem and labour is more expensive too.

Mumbai is undergoing a shift in activity from the manufacturing side in favour of the services sector, as do many large cities of the world as property prices hit the roof. The city has witnessed several corporates and small companies roll down their factory shutters to head out to the hinterland.

Says Dr R. H. Patil, the visionary credited with the success of setting up the world-class, National Stock Exchange and currently Chairman of the Clearing Corporation of India Ltd, "Mumbai will soon become purely a financial hub and all industries will move out of here. We are already seeing this happen. Only financial intermediaries and the support functions will remain in the city. Soon, companies will maintain outfits in Mumbai only for raising capital since all the banks and capital markets are based here. Urban infrastructure should not be much of an issue for the well-remunerated executives of financial firms as they can afford to create their own little world."

Over the years, several companies have shifted their manufacturing set-ups out of the city to escape the high taxes and octroi here. FMCG giant, HLL and automobile-maker, Mahindra & Mahindra are cases in point of companies that moved out its manufacturing units to relocate in the underdeveloped areas of various states of the country. Set-ups in backward areas come with tax incentives, which go a long way in cost rationalisation.

Textile mills shut shop in Mumbai due to a variety of reasons in the mid-1980s and even today many small and medium enterprises in the less-expensive North Mumbai are considering shifting base.

"The teeming metropolis is undergoing a desirable natural regeneration that had long been delayed.

"Just like New York, which saw its many garment manufacturing units pushed out to be replaced by services and, later, more high-end services, Mumbai too is undergoing that state of replacement and regeneration.

For very many years the textile mill areas were lying as idle assets in the midst of the city even as real estate prices were skyrocketing. These lands are now getting converted into commercial ventures, which is certainly a good sign," says Dr Gokarn.

"The next stage of development will take place in the mill areas of Central Mumbai. There is so much land in the mill areas that it will be used up only over the next 10 years," says Mr Tariq Vaidya, Head, Advisory Services and Asia-Pacific Research, Knight Frank India, the Indian fraction of the UK-based, international property consultant.

There are 500 acres of mill land in Central Mumbai in the areas of Mahalakshmi, Sion, Worli, Parel and Lower Parel controlled by private firms and the National Textile Corporation.

While some, such as the Kamala Mills, have been converted into commercial office spaces, Phoenix Mills hosts several retail stores and, more recently, the Nicholas Piramal group developed a mill area into a prominent office address.

Says Mr K. G. Krishnamurthy, Senior General Manager, Technical Services of Housing Development Finance Corporation: "For this city to grow further and to retain its position as the commercial capital of India, the State and Central governments need to make the mill lands of Central Mumbai and salt pan lands in suburban Mumbai available for development. Property taxes must be rationalised and the Urban Land Ceiling Act needs to be scrapped. Infrastructure projects are also critical to create linkages within the city."

It might be a few years before the implementation of the Bombay First-McKinsey report to transform Mumbai into a world-class city by pumping in $40 billion much like the transformation of Shanghai in the late 1980s.

Meanwhile, a few road linkages, such as the 25-km long, Sewri-Nhava Sheva link across the Arabian Sea, will help the city grow horizontally as against the vertical growth seen over decades.

The Worli-Bandra link would also help relieve bottlenecks and sustain growth in the interim period.